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Brazil Information Technology Report Q1 2011
Business Monitor International, Jan 2011, Pages: 63
The Brazil Information Technology Report provides industry professionals and strategists, corporate analysts, information technology associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Brazil's information technology industry.
Brazilian IT spending is expected to record double-digit growth in 2010, following strong growth in computer shipments. Government and retail demand drove most of the growth, as Brazil’s economy made a robust recovery, but strong price competition meant that PC revenues growth lagged shipments. Demand for IT products and services is projected to increase at a CAGR of 12% over the forecast period, making Brazil one of the best-performing global IT markets. A National Broadband Plan, and modernisation ahead of Brazil’s hosting of the 2014 FIFA World Cup and 2016 Summer Olympics, should help to drive demand for IT products and services.
In 2011, consumer PC sales are expected to continue to grow, thanks to economic growth and low unemployment fuelling consumer confidence. Meanwhile Brazil is thought to be one of the most promising regional markets for cloud computing, with growing demand in sectors such as retail, finance and healthcare.
Industry Developments
In October 2010, the government announced a new investment strategy to drive modernisation, with IT set to benefit. The government has earmarked US$344bn for the four-year plan to modernise its infrastructure, and IT vendors are hoping to secure additional business as a result of the increased government spending. The plan is expected to drive substantial investment in IT, not only directly associated with these events, but also related to transport and other infrastructure projects.
In May 2010, the Brazil government formally launched a National Broadband Plan (PNBL), which aims to triple access to broadband services by 2014. The government will invest BRL11bn in the plan, which will be managed by former state-owned telecoms company Telebras. The government has set an ambitious target for Brazil to have 90mn broadband connections by 2014, reaching half of Brazilian homes. The plan could provide a boost to the Brazilian computer market, as most broadband infrastructure is currently concentrated in major cities and towns.
Vendors reported an upturn in government IT spending in 2010, boosted by computer procurements by the ministry of education and schools. Government information and communication technology (ICT) spending reached BRL1.89bn (US$1bn) during January-July 2009. In terms of types of service, consulting accounted for about half of government ICT expenditures in the first seven months of 2009 with investment of BRL915mn.
Competitive Landscape
The Brazilian PC shipments market leader remains Positivo Informatica, ahead of leading multinational rivals like HP, Dell and Acer. However US rival HP reported strong growth in the Brazil market in 2010, cutting into Positivo’s share of shipments and, by the third quarter, surpassing it in revenues from PC sales.
The Brazilian IT services market is competitive with multinationals such as IBM, HP, Accenture and Indian vendors Infosys and Tata Consultancy Services (TCS) competing with local players like Politec, CPM Braxis and Stefanini. In September 2010, European IT giant Capgemini announced that it would buy a majority stake in CPM Braxis, Brazil’s largest IT services firm.
Meanwhile, US consulting firm Accenture said that it would set up two new Brazilian centres focused on providing business processes and IT services to the energy and agribusiness sectors respectively.
Vendors in the Brazil market are increasingly focused on cloud computing opportunities. In March 2010, business process outsourcing (BPO) player Tivit announced that it was launching cloud computing services targeted at corporations. Meanwhile, Brazilian IT services provider Avancera is the exclusive national distributor of Microsoft Dynamics AX in the Software-as-a-Service (SaaS) model, and claimed in March 2010 to be on its way towards closing six to eight Microsoft hosting contracts in the year. In H110 web portal UOL started to sell hosted enterprise resource planning (ERP) software services to Brazilian small and medium-sized enterprises (SMEs), in partnership with around 70 vendors, including Microsoft and local giant Totvs.
Computer Sales
Brazilian sales of computer hardware were up by around one-third in H110, boosted by government tenders, a recovering economy and easier credit. However fierce competition and price cutting in the PC market during 2010 meant that revenues growth lagged far behind that of shipments.
There remains considerable growth potential as the current level of computerisation is low, with PC penetration estimated at below 25% and expected to increase to around 40% by 2015. Greater affordability combined with more credit options, lower interest rates and tax concessions have driven sales. There is a sizeable grey market, although evidence suggests that this has been falling in recent quarters to less than 40% of unit sales.
Software
Brazil’s software market is projected to be worth US$4.1bn in 2011, with more robust growth compared with 2010. Software CAGR for 2011-2015 is projected at around 15%. Software is beginning to gain ground in Brazil, despite high annual software piracy losses.
The software sector’s current growth is being driven partly by stronger demand for ERP solutions from SMEs, with an estimated addressable market of 400,000 small businesses. The majority of demand is currently, in functional terms, for ERP and supply chain management. Brazil is thought to be one of the most promising regional markets for the utility software model, with demand in sectors such as retail, finance and healthcare.
IT Services
Brazil’s IT services market is expected to continue to grow strongly in 2011, with total spending of around US9.8bn as the economy continues to grow rapidly. The award of the 2016 Olympic Games to Rio de Janeiro, and Brazil’s hosting of the 2014 FIFA World Cup, are expected to drive substantial investment. Another area of opportunity going forward will be organisations looking for help to utilise efficiencies from cloud computing.
IBM has already estimated that 54% of its country revenues come from IT services, slightly more than its global average. Brazil has an ambitious plan to become one of the world’s top IT outsourcing destinations, but will have to overcome a number of challenges to achieve this.
E-Readiness
The World Economic Forum’s latest IT report ranked Brazil 53rd in the world in the area of ‘degree of preparation to participate in and benefit from information and communications technology’, placing Brazil fourth in the region behind Chile, Barbados and Mexico. The government recently said that 37mn elementary school children in Brazil should have access to broadband by 2010.
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